Diversifying EU energy supply

Additional supplies of gas or oil coming into the European Union are to be welcomed and the recent natural gas pipeline deal between Germany and Russia will benefit the bloc, according to Energy Commissioner Andris Piebalgs.

European Voice

10/19/05, 5:00 PM CET

Critics fear that the pipeline, which bypasses the traditional energy network including the Baltic member states and Poland, could be used as a political weapon to divert energy away from those areas.

When the deal was announced on 8 September, Polish President Aleksander Kwasniewski was particularly critical and accused the Germans of going "over EU heads" in the matter.

But despite coming from one of the countries potentially affected, Latvian Piebalgs was more sanguine. "This pipeline is a good additional supply for the European Union. As we have a common market it is better to have maximum supply so that the market can benefit," he said.

"It is a positive development that was not carried out as I would wish from a public relations point of view but it's nothing to be worried about," he added.

The Commission has four main pillars of action to safeguard Europe's energy supply: controlling the supply through partnerships with major suppliers, liberalising the energy markets within the EU, diversifying sources of energy so that Europe is not reliant on oil or gas and reducing energy consumption.

Piebalgs said that the Commission would con-tinue to work on both the short-term and long-term priorities for ensuring a safe and secure supply of energy into the EU.

"In the short term we will continue to work with all producer countries, not only of oil but gas and LNG [Liquefied Natural Gas] as well so that in Europe we can continue to ensure supply in the short term. We cannot do too much at European level, but we will encourage all producers to do what they can to supply the market.

"In the more medium and longer term there are of course no miracles, but we should follow the leads in energy efficiency. We are also finalising a biomass action plan and preparing a report on support schemes for renewables."

Piebalgs said that the Commission was doing its best to diversify Europe's energy supply. At the moment, most of the bloc's oil is imported from Russia, followed by Norway, Saudi Arabia and the Middle East. Gas imports are mainly from Russia, Algeria and Norway.

"It is a clear priority for us and we are working hard in the Caspian, in the African countries, in Russia and even in Norway to diversify our supply," he said.

Piebalgs said that the Commission would like biofuels - fuel made from raw biological material - to take a higher proportion of the fuels market, but that there were pitfalls.

Under a 2003 EU law member states are required to put at least 2% of biofuels on their markets and 5.75% by 2010 and may reduce taxes or make them tax-exempt.

"The difficulty is on the supply side; how much we should support production of biofuels in the EU. Should it be used as an instrument of the Common Agricultural Policy and should we encourage other countries to produce more and import biofuels into the EU?" he said.

Economic incentives were tricky, he said, because this might tempt producers to do whatever it takes to produce biofuels. Lobbyists have already pointed out that encouraging biofuels is likely to increase deforestation and could also increase the use of controversial genetically modified organisms by showing a political bias towards biotechnology.

"The biggest challenge is to achieve the goals of sustainability and security of energy supply but at the same time not compromising with some issues that could be very painful later on," the commissioner said.

Piebalgs is also pushing for the creation of a Market Observation Sys-tem "as soon as possible", that would help establish a more stable oil market. Part of the reason for the recent volatility of oil markets is that a lot of the data on reserves, con-sumption levels and production capacity is not as solid as it could be.

The Commission was presenting its proposals at a forum on hydrocarbon in Berlin this week (19-20 October) and hopes to get support from the relevant market players.

"Only reliable infor-mation will produce more and better responses from the market," Piebalgs said.